Accumulation of Assets – Only Half a Plan

By Charles Griffin,
CLU, ChFCPresident of Family Wealth and Wisdom, Inc.

Try climbing up a mountain only to find that you can’t make it down. Sounds silly, I know, but this happens regularly. To begin with, most people who even attempt to scale Mount Everest fail to get to the top (72%).

Unfortunately, our retirement objectives fail us even more abysmally. Of 100 people who start working at age 25, by age 65 only 4% or fewer have adequately stowed away enough capital for retirement! That means that 96% failed to get to the top of their own personal retirement mountain! How about yourself? Are you heading for a financial disaster like most people are?

Alas, even worse than failing to amass a retirement nest egg, is that the vast majority of us who do actually accumulate some assets for retirement wind up losing a huge portion, sometimes well over half of what we’ve accumulated, because we don’t know how to get back down the mountain with our assets intact. This eventuality comes upon us at a time when we are tired of sacrificing to make a living. We have worked for years only to see large portions of our wealth erode or be taken away from us by the government, banks, financial gurus, brokers, insurance companies, and others. At this point in our lives we are often times ill equipped to get back down the financial mountain. Everyone who has made a living from us has headed for the hills. Those who haven’t, have no idea how to advise us on how to avoid the financial pitfalls which we are about to face, pitfalls more onerous than those we encountered on our climb up the mountain. (Some of these pitfalls Include inflation, taxation, market risk, access to and proper use of assets, control of assets, associated costs in maintaining assets, medical needs, estate preservation, gifting, charitable giving, proper stewardship, etc.).

We’re not properly set up to avoid the inherent and the planned (subtly and those not so subtle) pitfalls we will encounter in our retirement years. These types of tragedies, while extremely common, can be avoided. The sooner we acknowledge their existence and come to grips with them the better we and our loved ones will fare.

Avoidance starts with proper preparation. It is never too late to start planning and trying to improve your present position. For instance, did you know that up to 85% of your social security income can be (and most likely will be) taxed again? That’s right! That means that if you’re receiving $20,000 a year in social security retirement benefits you can be taxed an additional $4,250 per year, each and every year, for the remainder of your retirement years (in a 25% bracket). So, in 24 years of your retirement, you can be paying over $100,000 in taxes that you don’t need to be paying, simply because you didn’t know how not to do so. You are not going to be told how to get down from your financial Mount Everest by the government, the entity that wants all of your money anyways.

Consider this fact. All along our career’s journey we’ve thought of ourselves as common simply because most of our friends were in the same socio-economic class as we were/are. In reality, it turns out that we are not very common at all. Most of us, those whose household’s adjusted gross incomes is $66,000 are actually in the upper 25% of all income earners in the country. Those of us whose adjusted gross income is $112,000 are in the top 10% of all income earners in the country. Do you feel rich or just ordinary, common? The top 5% in income earners goes to those whose adjusted gross income is $155,000 while the upper 1% tops out with those earning $345,000.

So, does this mean that your income is relatively common or uncommon? Do you think that the advice given to the masses, to common income earners focuses on wealth transfers due to taxation? Of course not! So why are we continuing to do the same common things that most everyone else is doing? While it’s true that we don’t know what we don’t know, we don’t need to stay in financial bondage any longer than it takes for us to become educated.

We at Family Wealth & Wisdom, Inc. are here to educate those who want to be able to do more with what they have. Call us for your free personal interview. We look forward to hearing from you soon.